THE MARKET FOR MEALS

PAMELA BLAMEY

GOLDEN, Colo. -- What is it about a company that allows it to increase profits exponentially every year, open a new unit every day and set a trend that competitors scramble to emulate?

Such questions often arise when the subject is Boston Market. Having increased its revenue from $43 million in 1992 to $384 million in 1994, and with more than 700 outlets in operation, the chain is spearheading the phenomenon of home meal replacement, which is being imitated nationwide not only by other food-service chains but by supermarkets as well.

Its implications for supermarkets have been considerable, shedding light on the way consumers patronize fresh foods departments and changing the way these departments approach merchandising in order to remain competitive.

Boston Market's success has prompted analysts and consultants, such as Jay Heilbrunn of Clinton Associates, Deerfield, Ill., to label the company "the clear leader in the home meal replacement category."

It is a perception that, not surprisingly, is supported wholeheartedly by Boston Market's vice chairman, Saad Nadhir.

"We were the first to present this concept and we are the model other companies use to try to compete in this category," he told SN.

Fast-food chains such as Kentucky Fried Chicken and Arby's have come up with their own home meal replacement concepts (the Colonel's Kitchen and Roast Town, respectively), but Boston Market's serious competition lies elsewhere, according to Nadhir.

"Grocery stores and supermarkets are really our biggest competition," he said. "They already have delis, but very few of them offer the convenience or volume Boston Market stores offer. However, they're definitely taking steps to compete with us on a more even level."

This may be true, but adding units from branded food-service operators is not the way supermarkets should do it, according to consultant Brian Salus of Salus & Associates, Midlothian, Va.

"Boston Market is building a strong brand identity with the consumer and I find it interesting that some supermarkets are trying to compete by using fast-food brands and other outside providers in their food courts.

"I think the supermarkets will be the big losers in this relationship, with Boston Market and the off-premises providers being the winners and building a future franchise with the consumer."

The most important lesson supermarkets have learned, according to Salus, is that they are competing for the very same customers.

"The customer shopping for meal solutions is the same customer -- the meal provider is the only one that changes," Salus told SN.

"The supermarket industry really owes a debt of gratitude to Boston Market, Kenny Rogers and the other members of the home meal replacement restaurant group for waking them up to the fact that the consumers of the '90s are empowered to make their own choices for food, and [are] looking for taste, quality, variety and convenience wherever they can find it, and this may not include the purchase of groceries for some," he continued.

A side effect of Boston Market's presence is that it has prompted chains like Wegmans Food Markets, D&W Food Centers, Lunds and Ukrop's Super Markets to successfully broaden their delis and food courts, Salus said. "The winner is the consumer, in that they have more choices, as well as the retailer, in that higher-profit prepared foods are readily accepted by the consumer, contributing to the bottom line."

However, Boston Market executives realize that other food-service operators could also prove to be a larger threat in the future: "We expect chains like KFC to try to evolve both their brand equity as well as their menu to try to be more competitive in the home meal replacement/fresh convenient meals category," Nadhir acknowledged.

The irony of the Boston Market "mystique" is that it is based on very simple, everyday concepts, Heilbrunn said.

"Although the basic menu offerings are not new or unique -- in fact, many are considered the basic staples -- Boston Market was the first to bring all the pieces of the concept together into a national chain."

Variety and options, he said, are the key elements to Boston Market's success. But Nadhir places the emphasis elsewhere.

"When you think of home meal replacement, you think of high quality and high convenience -- we have both. To compare, fast food may be high in convenience, but not very high in quality. Mom's cooking is very high in quality, but not very convenient -- especially for mom," Nadhir said.

Variety is certainly one of the company's priorities, however, as is manifested in the decision earlier this year to change the units' names from Boston Chicken to Boston Market. About 85% of the units had completed the conversion by this past summer, and spokeswoman Kelly Jorgansen said the company expects all conversions to be accomplished by the end of October.

All new units feature the Boston Market format, and the chain is literally opening an average of one per day, Jorgansen confirmed. "We're in 34 states and Washington, D.C., right now, with the highest concentration in the Northeast, followed by the Southeast, then the West Coast," she told SN.

"What people are finding is that if there isn't a Boston Market near them now, there will be soon."

Opening up the chain's possibilities through the name change was a key move, according to Heilbrunn.

"[The old name was] limiting," he said. "[And] to sell ham with a Boston Chicken label is kind of inappropriate, plus the term 'market' expresses [the concepts of] 'fresh,' 'current,' 'changing' and 'familiar,' all the attributes that Boston Market wants its customer to receive."

Boston Market units now offer four main entrees: aside from the trademark rotisserie chicken there is rotisserie turkey, as well as ham and meat loaf, and 16 hot and cold side dishes, according to Nadhir.

"Anyone looking at our menu can see that we have great variety at a great price -- about $5 for an individual meal and $3 to $4 per person for our family meals," he said.

Whether because of the variety or quality, consumers seem to be showing a pronounced preference for Boston Market meals over fast-food fare -- at least at dinnertime.

Heilbrunn estimated that at Boston Market units, the majority of business takes place at dinner, representing 65% of total volume. He added that a significant amount of that volume is takeout.

"This is the meal part which fast food has always wanted but has had a difficult time obtaining," he said.

However, while other operators -- supermarkets included -- hunger after the dinner meal dollar, it is the lunch crowd that Boston Market now is going after. "Lunch tends to be more individual meals, and efforts are under way to prop up this day part through expansion of sandwiches and other lunch-type items," said Heilbrunn.

Answering this particular call is the Boston Carver line, which includes ham, turkey, chicken, meat loaf and Carver Club sandwiches, spokeswoman Jorgansen explained.

On whole wheat or white bread with special sauces, cheese, lettuce and tomato, the sandwiches weigh in at about 11 ounces, compared with the 8 ounces of a typical burger, she added.

"It's still the same entree, just in a bun," she explained. "[Customers] still order sides with it. We've had a very good lunch response."

The company claims not to target any particular demographic segment.

"Our customer base includes anyone who wants fresh, home-style meals but doesn't have the time or for some other reason doesn't want to cook those meals," Nadhir said.

"Customer feedback and store revenues show we're hitting our mark and providing a product people want -- and love -- and that product is fresh, convenient meals."

The company's marketing message, currently reiterated in a new round of television commercials designed to ease the transition from Boston Chicken to Boston Market, has not changed.

"We want customers to know that we provide fresh, convenient, home-style meals that deliver both the physical and emotional values of real food," Nadhir said.

Commercials featuring the tag-line "deja-food" are supposed to evoke warm memories of home and childhood. "Their mission is to remind people that this is the same great food that came from Grandma's kitchen," Jorgansen told SN.

They also highlight the new products -- meat loaf, turkey, and ham -- available under the new format. These additions were a direct result, Nadhir said, of consumer demand.

"Boston Market is committed to being consumer-relevant at all times, and we will evolve from time to time to maintain our relevance. The introduction of ham, turkey and meat loaf was the result of customer feedback."

He would not specify what evolutions might be looming in Boston Market's future, but he did acknowledge that the chain will look to address consumers' concerns about healthy food.

"Right now we're looking at some new low-fat items which we will probably introduce in the next six to nine months," he told SN.

Another lifestyle trend that will continue to be a major influence on Boston Market's strategy is the two-income family.

"The trends that favor our business are fairly irreversible," he said. "As people get busier, they have less time to cook and do other things. That's where we come in.

"To give you some statistics, two-thirds of women now work outside the home, compared to less than 50% 20 years ago; and the number of households where both parents work -- co-provider families -- has risen 50% in the same time. These demographic changes directly affect the potential of our market, and it's highly unlikely that the percentage of working couples will decline -- we expect it to go up.

"The home meal replacement category has been estimated at anywhere from $20 billion to $100 billion. We think it's right around $25 billion -- and growing."

To accommodate this growth, Boston Market has been making some changes in its day-to-day operations.

"The most significant effort we're making right now, in terms of operations, involves flagship stores," Nadhir said.

"In an effort to maximize all the space and equipment in our stores, we began testing flagship production last December. A flagship store is larger than our standard prototype store, and has its own retail store as well as a kitchen with enough space and equipment to perform the initial stages of food preparation."

Flagship outlets will service between 20 and 40 "satellite" units, he explained.

"For example, flagship stores handle the chopping of vegetables or the initial preparation of certain items. Those vegetables or items are then sent to satellite stores for final preparation before servicing."

Nadhir expects four major benefits from this system. "Flagship improves the quality and freshness of our side items and ensures consistency in taste and texture. Flagship stores will also make it easier for us to introduce new menu items because we'll have fewer production people to train."

Most of the cooking will still be at outlet level, Heilbrunn said.

"It's the preparation and some of the nitty-gritty work that they want to centralize. Many operational benefits will come from this without many of the problems historically from the commissary concepts."

Another major modification may occur with the units' physical plants as the company's "store-within-a-store" concept takes off.

"The Boston Market concept makes it possible for us to not only offer great tasting, ready-to-eat food, but also items such as whole and half hams, trademarked sauces and other items that people can take home and serve later," Nadhir said.

"The configuration of the stores may change to facilitate this more."

Change, and the flexibility to accomplish it in a way that is relevant to consumers, is vital to the chain's philosophy, Heilbrunn said.

"With most of the [home meal replacement] concepts, you will continuously see the challenge and the competitiveness among them to always be relevant, and always have something new.

"[This] reflects the change of culture and their attitude, which is to always try to evolve in a way that mirrors the consumer."

Salus pointed to one potential weakness for the otherwise formidable chain -- its units' accessibility.

"Their format of a single cafeteria-style line . . . is not convenient to the customer," he said. "Drive-through and pick-up and delivery, offering the consumer more points of access, are necessary additions."

Indeed, Salus said supermarkets have one built-in advantage here. "A well-run supermarket food service is more convenient in that a supermarket allows the consumer to leverage their time by picking up a variety for dinner as well as some groceries. A video, wine and beer and tomorrow's freshly cleaned suit is helpful, too."

Whatever changes to the menu or physical plant may be in the wind for Boston Market, the overall outlook for the company and its merchandising approach is good, according to Heilbrunn.

"In 1991 Boston Market had 34 stores doing about $21 million of business -- by the end of this year, they expect to have over 850 stores, and over $700 million in systemwide sales," he said.

"By the year 2000, their forecast is for sales in the $3 billion range, with more than 3,000 units."

As long as the chain continues to be fast on its feet, it should reach these goals, Salus concurred.

"People have money and mobility and less and less time, so they want to make choices in how they feed themselves and their family. As long as Boston Market continues to operate good units offering good value and reinventing [itself] as [a] meal solution provider, [it] should continue to be a player.

"However, the competition from your friendly local grocery retailer is going to get fierce."

Boston Market at a Glance

Headquarters: Golden, Colo.

Number of stores: 711 (as of Sept. 6)

New unit openings: One per day

Revenue for 1994: $384 million (1993: $152 million)

Average weekly store sales: $23,000

Meals taken out (vs. eat-in): Two-thirds

Average price per meal: $5

Number of states with penetration: 34, plus Washington, D.C.

Source: Company statistics